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Running Hot and Cold: Economic Liberalization and Foreign Direct Investment in L atin A merica by Sector
Author(s) -
Hecock R. Douglas,
Jepsen Eric M.
Publication year - 2013
Publication title -
latin american policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.195
H-Index - 4
eISSN - 2041-7373
pISSN - 2041-7365
DOI - 10.1111/lamp.12016
Subject(s) - foreign direct investment , spillover effect , investment (military) , liberalization , international economics , tertiary sector of the economy , portfolio , business , resource (disambiguation) , economics , politics , international trade , market economy , finance , economy , macroeconomics , political science , law , computer network , computer science
This article examines the effects of market‐oriented economic reforms on foreign direct investment ( FDI ) flows to L atin A merica from 1985 to 2006. In contrast with most existing scholarship, we disaggregate FDI into its destination in the primary resource, manufacturing, and service sectors, allowing us to determine that different kinds of investments exhibit distinct behavior. Manufacturing FDI appears to be erratic; previous investment is not a predictor of current investment. FDI across sectors is associated with varying policy environments, with service and primary resource investment attracted to hosts with policies associated with more stable economic and political contexts. Overall, manufacturing FDI appears to function more like “hot” portfolio investment and is less likely to provide some of the positive spillover effects thought to be associated with more permanent FDI . These findings have an array of implications for economic, development, and industrial policies throughout L atin A merica and the developing world.